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Emanuel: No Property Tax Hike To Fix Budget

Mayor Elect Rahm Emanuel addresses the press at the Union League Club in Chicago. (Credit: CBS)

Updated 02/23/11 – 3:52 p.m.

CHICAGO (CBS) — On his first full day as mayor-elect of Chicago, Rahm Emanuel said Wednesday that he would not consider a property tax hike to address the city’s budget problems and underfunded pension systems.

With a structural budget deficit approaching $1 billion a year when underfunded pensions are included, Emanuel said he’d deal with the city’s finances in part by negotiating pension system changes with the city’s employee unions.

Estimates have pegged the city’s unfunded pension liabilities at as high as $20 billion and, despite objections by Mayor Richard M. Daley, Illinois lawmakers have approved pension reform legislation requiring cities and other municipalities in Illinois to fund the pensions for their workers at 90 percent by the year 2041.

In the city of Chicago alone, that amounts to some $550 million a year starting in 2015. Unless the city wins concessions from labor unions or gets the money somewhere else, raising $550 million a year in city revenue would be equal to a 90 percent property tax hike.

As CBS 2 Chief Correspondent Jay Levine reports, Emanuel said Wednesday that he would instead seek to work with the city’s labor unions to make changes to the city’s pension systems to avoid any property tax hike.

“it would be irresponsible to raise property taxes 90 percent, which I will not do,” Emanuel said.

Asked if there was any level of property tax hike that he would support to fix the city’s pensions, Emanuel said no.

“This is going to be collective bargaining and the collective will be with the people that are representing our police, our firefighters, our teachers and other unions as we try to work this out,” Emanuel said. “There are parts to this and I am not looking at a 90 percent increase in property (taxes.) I am not looking at property taxes.”

Emanuel said he also wanted the city’s employee unions to know that he favored maintaining the defined pension benefits system that city employees already use for their retirement funds, instead of forcing them to switch to a 401 (k)-style system of defined contributions.

“I, as a mayor, am committed to the defined benefit pension,” Emanuel said. “We are not the only city facing this crisis, or state. Every municipality is. I want to be the first city to solve it on a cooperative basis. It will require all of us working together. When I say shared sacrifice, there will be shared changes.”

For his own part, Emanuel has said that, while he will take a salary as mayor, he will not take a pension because he doesn’t need it.

Emanuel also criticized Wisconsin Republicans who have been pushing to eliminate most of the collective bargaining rights for that state’s employes in order to solve Wisconsin’s budget and pension problems. He said he prefers to work with unions to reach a compromise solution, rather than taking a hardline anti-union stance.

“I reject the way Wisconsin has approached this,” Emanuel said. “The representatives of labor have said they’re ready to help solve that problem.”

Meantime, Emanuel also said that he wants to work with what is sure to be a vastly different City Council than the current one.

At least 10 sitting aldermen were headed for runoff elections in April and several other aldermen were retiring or had already stepped down for other opportunities, including former 4th Ward Ald. Toni Preckwinkle, who took over as Cook County Board President last December.

For the past 22 years under Mayor Richard M. Daley, the City Council has largely been seen as a “rubber stamp” for the Daley administration, with aldermen rarely bucking his budget plans or other initiatives at City Hall.

Emanuel said he wants a more cooperative partnership with the aldermen.

“They cannot be a rubber stamp. That’s unacceptable to me. The challenges are too big,” Emanuel said. “They can’t be what they were in the last few years. They don’t want it, the city doesn’t want it, I don’t want it. I was a former legislator. I don’t want it.”

At the same time, Emanuel said he doesn’t want a return to the days of the “Council Wars” in the 1980s, when a majority block of aldermen blocked virtually every initiative of then-Mayor Harold Washington.

Emanuel has previously pledged to make the aldermen partners in his plans to reform city government and address the city’s financial problems. On Wednesday, he invited aldermen to bring him any ideas they might have for saving money in the city budget.

“They need to be partners in reform. If they have ideas on how to save money, walk it right up to my office,” Emanuel said. “If they have a change they want to make that brings more efficiency, more transparency, let’s go.”

In a radio interview earlier in the day, Emanuel said he wanted to conduct a forensic audit of the city budget to examine spending at all city departments. Emanuel said the audit would be part of his goal of cutting $75 million in spending from the 2011 budget — Daley’s last budget as mayor.

Emanuel also said that part of the goal of a forensic audit would to get a more detailed accounting of the city’s minority contracting program.

He said that, while he knows about 30 percent of the city’s contracts go to firms owned and operated by women and minorities, he doesn’t know what types of contracts they are most likely to get.

“While we know that 30 percent is set aside for women- and minority-owned businesses, three percent of that 30 is African-American at this point,” Emanuel said. “But we don’t know how the financial services is in the African-American community, versus where it is in the construction. We say three percent, but you have to dig deeper and know more.”

Emanuel will take office as mayor in May, when Daley completes his current term.

Until then, Emanuel said it’s important not to interfere with Daley’s efforts to push his own agenda, either in Chicago or in Springfield, where state lawmakers resume their Spring session next month.

“There will be one mayor at a time. Mayor Daley is the mayor until May 16th, not Rahm Emanuel. He has my full support, I have a transition to prepare,” Emanuel said. “We will have one mayor at a time. It is not my job to go to Springfield and supplant that and push my car in front of his.”